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July 12, 2013

Envestnet Takes Aim at Big Data

‘We are the opposite of Big Data. We are taking data and making it actionable.’

CEO Jud Bergman of Envestnet.

Big Data is all the rage, but taming all the information flowing through the world’s computer networks, mobile devices, social media channels and so on is a huge job.

Chicago-based Envestnet, among a handful of others, is trying to help retirement plan advisors and others in the finacial services industry corral all of that data. The publicly traded wealth management software company does so, it says, by looking at Big Data from a different perspective.

“(The term) Big Data emotes this NSA prism that we are taking from you and not giving back,” said James Patrick, executive vice president, advisor-managed programs for Envestnet. “We are the opposite of Big Data. We are taking data and making it actionable.”

That’s good, because anyone who can answer with clarity and authority the questions retirement plan advisors and their clients ask routinely is bound to do well.

Envestnet, in fact, is long accustomed to capturing the industry’s attention, as well as Wall Street’s. Launched in 1999, the company today has more than 16,000 advisors who have fee-based assets under management or administration on its platform.

The company’s shares jumped in early July by as much as 13% after it closed on a $10 million cash acquisition of Prudential Wealth Management Solutions. The deal includes contingent consideration of $23 million in cash to be paid out over three years.

Envestnet announced its move into Big Data early this year, dubbing it “Envestnet Intelligence.”

Envestnet, of course, isn’t alone in recognizing the potential of turning Big Data into something useful. Companies as large as IBM have been plying these waters, as have a number of startups.

The research and consulting firm Celent explored the potential of Big Data in the financial services industry in a recent report, “Big Data in Wealth Management: The Search for Customer Insight.”

“Many wealth management firms have begun to examine Big Data and analytics solutions; some are at exploratory stages or early stages of deploying solutions,” the report said. “Celent expects the industry to catch up as more firms discover additional insights about their customers that can help increase retention.”

The big challenge for anyone in this field is finding ways to make all of that data understandable for clients. It does no good to hand over a report filled with undecipherable numbers.

Envestnet, its executives say, understands that.

“(Clients) just say, “‘Get me to the end of the rainbow,’” Patrick said. “The client wants simplicity. We do a lot of complex things to deliver that simplicity.”

It’s not just the clients who want simplicity. Advisors also need their information delivered in a form they can digest and use.

“Relationship managers, advisors, and traders are using Big Data and analytics to help them discover, develop, and test investment ideas and strategies,” the Celent report said. “Increasingly firms want to capture more information from looking for correlations and investment opportunities across multiple asset classes and over longer time horizons. Big Data helps firms establish larger data sets which enable users to run experiments more quickly to uncover actionable investment ideas.”

It’s complicated, no doubt.

For Envestnet, getting to the bottom of it all means using its software to create benchmarks that allow advisors to see how they are doing in various investment categories.

Mike McGowan, senior vice president of strategic business development for Envestnet, said its software has tested well with advisors because it helps them manage their businesses.

And those benchmarks, Patrick says, help make a business more efficient when it comes to making sure investments are panning out. In a snapshot, managers can see which advisors do well and which lag. Adjustments can be made quickly. And once advisors get the simplified data, they can disseminate it to clients as they see fit.

Not surprisingly, Celent is sold on Big Data:

“Combining analytics and aggregated data will help wealth managers improve customer and advisor retention, discover investment opportunities and monitor operational and reputational risks,” Bill Fearnley Jr., the report’s author and a senior analyst with Celent’s Securities & Investments Group, said in statement. “Celent recommends firms and providers choose specific projects and begin to explore the power of new analytics and visualization tools.”

Envestnet sees a more basic business reason to tame Big Data. “The more hooks you have, the more bells and whistles you have, the better chance you have to be the single advisor (for a client),” McGowan said.

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